Scott Walker decides to resume tax credit for historic buildings

Madison — Three weeks after freezing a multimillion-dollar tax credit for rehabilitating historic buildings, Gov. Scott Walker's administration is restarting it, saying officials had resolved concerns about the credit's impact on the state's taxes and budget.

But the administration is keeping the hold on a related credit for buildings constructed before 1936 that aren't recognized as historic.

On June 23, the Wisconsin Economic Development Corp. put a hold on both tax credits, saying their budget impact was expected to hit $35 million. That's nearly nine times an original estimate of $4 million that was widely viewed as too low when the budget was passed last year.

Walker said in a statement Monday that his administration was now satisfied the tax credit targeting historic buildings can move forward. Lawmakers and Walker increased the credits not once but twice last year, quadrupling it to 20% for qualifying projects.

"The Historic Preservation Tax Credit has proven to be a successful economic development tool," he said. "While it was necessary for the Wisconsin Economic Development Corporation to determine the best method to continue the program, worthwhile projects can now move forward to help grow local economies and revitalize communities throughout our state."

All $35 million of the tax credits awarded so far will still go toward the qualifying projects, as long as the developers go through with their plans as submitted to the state, WEDC spokesman Mark Maley said. Of that total, about $15 million, or 43%, will go to structures built before 1936 but not certified as historic, he said.

The state will limit the impact of the program by leaving the moratorium in place going forward on credits for these older but nonhistoric buildings.

The process for certifying historic buildings involves the state Historic Preservation Officer and the federal National Park Service. The Walker administration plans to work with those groups as it considers how to handle the tax credits in the 2015-'17 state budget, according to a letter sent to lawmakers Monday by Reed Hall, chief executive officer of WEDC.

To aid in that review, WEDC, the state's lead jobs agency, will collect information on the tax credit's return on the public money invested.

In a statement Monday, the co-chairs of the Legislature's powerful budget committee, Sen. Alberta Darling (R-River Hills) and Rep. John Nygren (R-Marinette), praised the lifting of the moratorium.

"We support that decision because of the direct impact it will have on local communities," the lawmakers said.

In debate last year over the credit, a few conservative Republicans in the Legislature and articles in the Milwaukee Journal Sentinel questioned whether the law could end up cutting state tax revenue by much more than predicted by supporters. But the proposal passed the Legislature last fall with largely bipartisan support and was signed into law in December by Walker.

Republicans, developers and local officials successfully advanced the measure by making an unusual alliance with Democrats, trade unions and historic preservationists. The legislation provides the tax credits to developers who restore historic buildings, typically located in urban areas such as Milwaukee.

Walker signed the tax credit law in December at the proposed $35 million Hotel Northland redevelopment in downtown Green Bay. The development would convert that vacant building into a boutique hotel.

The projects before WEDC so far include 10 potential developments in Milwaukee, including a John Pritzlaff Hardware Co. building just south of downtown; the Milwaukee Paper Box Building at 1560 W. Pierce St.; and 700 Lofts on W. Michigan St. Other projects are being proposed for cities around the state such as Madison and Racine and smaller communities such as Ashland and Rice Lake.

The proposal's lead Assembly sponsor, Rep. Chad Weininger (R-Green Bay), has said Wisconsin needs to offer credits that are competitive with those provided by other states and can help revamp aging buildings that are a drag on the state's cities.

According to the National Trust for Historic Preservation, 31 states provide historic preservation tax credits. Most of those credits are in the 20% to 25% range for commercial restoration projects.

Skeptics note, however, that the money being invested in restoring hotels and other buildings will have to be made up by other taxpayers or taken from other priorities in the state's budget, which could have larger economic payoffs.

The tax credits could benefit developers with little or no tax liability because they can be sold to businesses such as utilities or banks that aren't involved in the actual restorations.

About Jason Stein

Jason Stein covers the state Capitol and is the author with his colleague Patrick Marley of "More than They Bargained For: Scott Walker, Unions and the Fight for Wisconsin." His work has been recognized by journalism groups such as the American Society of News Editors, the Society of American Business Editors and Writers, and the Association of Capitol Reporters and Editors.